Cruise industry braces for structural changes as COVID-19 changes dynamics
Although embarking on a cruise ship would be constrained in the near future, several major companies in the industry have chalked out SOPs and introduced COVID-19 safety measures.COE-EDP | Updated: 19-07-2020 07:29 IST | Created: 19-07-2020 07:29 IST
The cruise industry has been one of the worst-hit industries due to the COVID-19 pandemic ever since the initial stages of global spread - the headlines of Diamond Princess stranded off the port of Yokohama with hundreds on-board in early February will leave long-term scars on the industry. As the virus spread farther across the world, several other ships were blamed to be hotbeds for the spread of COVID-19 as thousands of cases were reported and ships had to sail through choppy waters as countries refused to take them in.
But the troubles for the cruise industry didn't end there as the major companies were also suffering massive losses but were left out of government bailouts for the most part. Combine that with the consistent negative coverage, many people had argued that the industry will undergo structural changes and some major players could go down when it makes it to the other side.
Another setback for the industry is a negative stance of several governments that have officially advised their citizens to avoid going on cruise ships, further delaying the recovery process. Even the World Health Organization (WHO) has advised travelers to consult their doctors before leaving for a trip by sea as it can "increase the risk of some medical conditions."
The negative regulatory stance along with negative coverage can cement the perceptions about risks of going on cruise ships and the industry will a tough job recovering from the setback, especially as controversies continue to haunt some companies. Although passengers were able to get off cruise ships in early April, many crew members had been stuck in the sea. Even though cruise companies have now made arrangements to repatriate crew members, it came only after dozens of them were infected, a few died on-board, and there were even a few reports of suicides along with protests. Cruise companies along with stakeholders are now doing damage control, a lot of which is needed.
As indicated in the previous research-based analysis of the Centre of Excellence on Emerging Development Perspectives (COE-EDP) titled "Maritime transport post-COVID 19: Disruptions ahead in business models, techno-investments, regulations", the cruise industry is a resilient bunch that would ultimately bounce back but the consistent negative coverage could leave long-term scars on the industry. To overcome that the industry would need to step up commitments towards environment and society, and offer more diverse packages that attract a more diverse customer base rather than elderly guests contributing the majority of sales.
COVID-19 safety measures
Although embarking on a cruise ship would be constrained in the near future, several major companies in the industry have chalked out SOPs and introduced COVID-19 safety measures. Germany-based Nicko Cruises has even restarted operations by launching river service within the country.
Carnival Corp., the world's largest cruise company, has introduced cleaning measures "in addition to existing rigorous daily cleaning regimen and standards." The measures include more frequent cleaning and sanitation of frequently hand-touched surfaces, new SOPs for food stations, increasing handwashing sinks, and sanitizing applications along with informing guests about proper hand-washing techniques. The company has also said that electro-static machines would also be used for deep cleaning of highly-trafficked public areas at night.
Royal Caribbean has also announced COVID-19 safety measures which include additional sanitation measures across the ships, increased availability of sanitizers along with canceling or modifying itineraries to impacted regions, mandatory screenings, and enhanced medical protocols.
New measures have also been announced by Norwegian Cruise Line as part of its Peace of Mind policy and will see a Public Health Officer added to the crew of each of its ships, as well as the additional medical staff. Medical-grade air-filtration systems will also be installed on cruise ships operated by the company.
Like Royal Caribbean and Carnival, Norwegian will also keep the traditional cruise buffets but would minimize self-service so that multiple passengers don't handle the same utensils. The measures also include better vessel sanitation programs for the entire ship before and during the voyage and enhanced pre-boarding screening of all guests. Both crew and passengers would be pre-screened and will be subject to constant monitoring through the voyage.
Elderly guests under scrutiny
Elderly guests make up a significant portion of revenues for cruise lines but the panic caused by the coronavirus outbreak in the generation, the most vulnerable group to the disease, might make them hesitant from going on cruise ships.
And the panic isn't just ramped up by the humongous number of cases and the strict measures imposed by governments, industry body CLIA itself had earlier mandated that passengers above 70 years of age or those with chronic underlying health conditions, would need a "Fit-to-Sail" doctor's note to be able to take part in a voyage. The order could have left many potential cruisers away from ships especially because doctors would hesitate in writing such notes due to liability issues. The condition was revoked soon after it had set off a furious debate among cruisers over 70.
Several major companies have since then reassured cruisers over 70 years of age that they will not have to provide doctor's notes in order to be able to cruise, once operations resume.
Despite numerous setbacks over the past couple of months, the resilience of the industry was on full display when Carnival announced that it could resume operations in August and its bookings shot up 600% compared to the previous three days before news of August trips were announced. Bookings were up 200% even over August 2019 – the normal times.
Several news outlets have quoted Cruise Planners representative as saying that the new bookings were being generally made by younger and healthy individuals who are "not a bit concerned about traveling at this time although some networks have said that "avid cruisers" are leading the pack in driving sales of other cruise lines. The surge could also be attributed to hefty discounts and attractive offers along with Future Cruise Credits provided to guests whose trips were canceled due to COVID-19.
"Prior to COVID-19, we would typically judge our performance on how well we are performing against the same period last year. However, given these unprecedented times, we are looking at our bookings and comparing them week over week," said Michelle Fee, founder, and CEO of Cruise Planners. "We are beginning to see positive signs of improvement versus the last four weeks, which is encouraging. We do feel that we may be 'turning a corner' and seeing signs of better booking weeks ahead."
Drew Daly, senior vice president and general manager of Dream Vacations, CruiseOne and Cruises Inc., is also optimistic about industry's recovery and said the companies have experienced a "nice, consistent increase in volume" of both cruise and land sales during the past weeks.
Another industry insider James Ferrara, co-founder and president of InteleTravel and an advisory board member of the Cruise Lines International Association, has also said his network experienced a 300 percent growth in cruise sales since mid-April. He attributed the increase in part to "Fear of Missing Out," or FOMO, on discounts and pent-up demand.
While many people think that repeat cruisers are likely to lead the way to recovery, the industry also understands the need to attract first-time cruisers to grow and create more diverse offerings, thus a more diverse customer base.
Charles Sylvia, CLIA's vice president of membership and trade relations, said that there will be "more challenges ahead with regard to the first-time cruisers" but believes that good testimonies by people returning from cruises with positive stories will put them at ease.
"Once they see the resumption of operations and once they see friends and family members and co-workers going on cruises and coming home with that same level of enthusiasm and satisfaction, then they will be back -- the first-time cruisers will come to us," Sylvia said.
Carnival Corp CEO Arnold Donald has also acknowledged the role of travel advisors and happy passengers in the recovery of the cruise industry. "We were busy knocking down myths before, and we'll have to return to that," he said, adding that the two "most powerful ways" to do that are through travel advisors, "with their knowledge and experience and personal relations with their clients," and the passengers, who will "provide the kind of testimonials and credibility with their friends and colleagues and relatives."
The right price is also a big persuader, as it has always been for the travel and tourism sector after a crisis. Cruise lines are offering hefty discounts and attractive offers and it is seemingly successful in luring customers. As mentioned earlier, bookings for Carnival have soared and it can be, at least, partially attributed to the fact that you can book one for as low as $28 a night.
Francesco Galli Zugaro, founder and CEO of Aqua Expeditions, has also said, "We certainly believe we can get new-to-cruise guests on-board and have seen this through a number of new customer inquiries during the lockdown."
"We certainly believe we can get new-to-cruise guests on-board and have seen this through a number of new customer inquiries during the lockdown," Francesco Galli Zugaro, founder and CEO of Aqua Expeditions, a small-ship specialist, adding: "We have always been very transparent with our guests on our strict health and safety policy; this will be even more important moving forwards."
While travel advisors and returning cruisers play a major role in steering first-time cruisers, there is only so much they can do until there are diverse offerings, especially in case of younger customers who might not have the kind of time that elderly guests do to spend on a vacation.
In the past few weeks, most of the changes in offerings and ships are to ensure the safety of crew and guests in view of the COVID-19 pandemic, which is understandable as the first priority right now is to get ahead of the crisis. But industry watchers are keenly awaiting the first sail of Scarlet Lady cruise ship by Virgin Voyages, a new cruise line that aims to attract non-traditional cruisers by offering a different experience in their adults-only voyages. Their cruise ship has a different-than-traditional design which includes a tattoo parlor on-board and hosts drag queen brunch, opening it to a whole new audience.
Prior to the COVID-19 pandemic, analysts were hopeful about Virgin's bet and 2020 was poised to be a record-breaking year for the industry. But back then the company wasn't planning to weather the impact of a global pandemic, which has forced it into postponing Scarlet Lady's sail to October. The outbreak has changed the dynamics of the market for short-term and several ideas have been floated around changes in the design of cruise ships but companies have been shying away from big investments, especially since the terms of industry's reopening are uncertain.
VisionRI's Centre of Excellence on Emerging Development Perspectives (COE-EDP) aims to keep track of the transition trajectory of the global development sector and works towards conceptualization, development, and mainstreaming of innovative developmental approaches, frameworks, and practices.
- FIRST PUBLISHED IN: